Family businesses often have specific objectives that are unique to your family’s values, and your succession planning may need to account for how you’ll empower younger family members to become confident leaders of the business and family enterprise.
“Families need to take a thoughtful and intentional approach to these issues,” Elder said in episode 19 of the Truist Wealth podcast, I’ve Been Meaning To Do That, the first of a three-part series on running a family business. That approach starts with understanding what your goals are for your business.
Defining success for your family business
Profitability and sustainable growth are important for any business. Coming up with other specific definitions of success is up to you and your family. “Family businesses can define success in a way that reflects their values and their focus,” said Russell Sanders, managing director of the Business Transition Advisory Group at Truist Wealth.
That may mean your business prioritizes making a difference in the community or being a leader in its field. Success for your family business can also be measured in how it helps support your family—not just financially, but personally. “Many family businesses provide a source of family engagement,” Sanders said. “They can educate the next generation about the benefits of hard work.”
Developing the family enterprise
The family business is just one part of what could be referred to as the family enterprise, or the full spectrum of your family wealth. “It could include a private foundation,” said David Herritt, head of the Center for Family Legacy at Truist Wealth. “It could be a vacation home that the family is managing or some commercial real estate. There are many different ways to think about the family enterprise, which is concerned with enhancing and sustaining the family’s wealth.”
Not every family member may be a good fit for the family business, but there are many other roles they can play in developing the family enterprise. “You could have somebody who plans the family meetings and the family retreats,” Herritt said. “A family member could serve on an investment committee or act as a trustee. If they have a legal background, they could help the family with their estate planning and tax advice.”
It’s important to communicate clearly with your family members about your plans and their expectations in supporting the family enterprise. Whether they’re interested in a leadership position within the family business or some other role, you can encourage their success and support their growth.
Empowering family leaders
“It’s one thing to understand the business, and it’s another thing to lead the business,” said Jeremy Spidell, director of client engagement at Truist Leadership Institute. Preparing family members for leadership roles in your family business comes with additional challenges. “There’s ‘child of owner’ syndrome, which involves this perception that people in the organization may be skeptical of a family member in a leadership role.”
Family members assuming leadership roles in your business can overcome these challenges in part by cultivating self-awareness, Spidell said. Knowing your strengths and weaknesses can help you manage your emotions and grow as a leader. “There are a few ways you can do that, including executive coaching and self-assessments.”
The sooner you start communicating with your family members about their roles in the family enterprise, the sooner you can start cultivating leaders who will steer your business into the future. Empowering the next generation can help ensure your family business will continue on and be a source of wealth for decades to come.
Want to hear more about running a family business? Check out the three-episode miniseries of our podcast, I’ve Been Meaning To Do That, starting with Episode 19 on how to “Define success for your family business.”